Travel & Tourism Round Table April 2012

 Keep them coming

Many Tar Heel tourist attractions took a hit in the recession. Here's how some are bringing business back.

Because of either perception or a lack of funds, leisure was the first item companies and families slashed from their budgets when the recession hit. The travel and tourism industry in North Carolina, which created more jobs last year than any other despite state budget cuts, was forced to react. Resorts, hotels and popular amenities of tourists, such as sports franchises, reprioritized, holding on to their core audience and not trying to add more. They reassessed their value, trying to offer more bang for a guest’s buck. For many, it paid off. A panel of industry insiders recently gathered to discuss how they survived and how they’re tackling the future. Participating were Lynn Minges, assistant secretary of tourism, marketing and global branding at the N.C. Department of Commerce; Bill Cecil, president and CEO of Asheville-based The Biltmore Co.; Tom Pashley, executive vice president of marketing at Pinehurst Resort; Phillip Cunningham, general manager of Great Wolf Lodge in Concord; Dave Olsen, vice president and general manager of PNC Arena in Raleigh; Rolf Blizzard, vice president of Winston-Salem-based Turnpike Properties LLC and chairman of Commerce’s Travel and Tourism Board; and Mike Crawford, regional managing partner of the South Carolina and western North Carolina offices of Charlotte-based Dixon Hughes Goodman LLP, which sponsored and hosted the discussion. Following is a transcript, edited for brevity and clarity.

What’s the state of the travel and tourism economy?

Pashley: We’re definitely seeing recovery. The corporate side, which is over half of our business, is beginning to return. That’s the side that really avoided coming to places like resorts and golf destinations during the difficult times because of the perception it gave. As companies were laying people off, going to what was perceived as a luxury destination was frowned upon. But that’s behind us as companies begin to hire again and grow. Hosting meetings and educational events and entertaining clients at places like Pinehurst is coming back. On the leisure side, consumer confidence is returning. It’s still touch-and-go, but as that continues to improve, we’ll see more and more folks coming back and enjoying leisure activities like golf.

Cecil: We’ve seen recovery to a certain degree at Biltmore. We got off to kind of a slow start in July and August. Our budget was basically to be about even with the year before. Then September picked up a little bit, and October was good — we made budget. And then, by the end of our Christmas season, we actually made up all our losses. By the first Monday in January, we were ahead of our budget for the entire year. The beautiful weather that we have had from December all the way through January has been really good. But I’d call the recovery kind of touch-and-go. We’re seeing our group business recover. Sometimes in the past it felt like we could push a button and people would come. I feel like I don’t know where the button is right now. But this Christmas, it worked.

Cunningham: Great Wolf Lodge opened in 2009. I wouldn’t recommend that to businesses. It was very interesting. But we were able to sustain our leisure business because we are such a short-term, drive-to destination. We met expectations in 2009 and exceeded them on the leisure side in 2010. We struggled in the association and corporate-group side. We struggled in getting people to see that Great Wolf was more than just a leisure destination. The tide turned in late 2011. In the last quarter, we started to see groups impact us, and we are starting to really see it this year. But it’s coming back very slowly.

Olsen: Ironically, as the tourism industry suffered through 2008 and 2009, those years weren’t bad for the arena business because people weren’t traveling, so they were spending their dollars locally. My events, and the revenue from my events, never really fell off. Where we see it fall off or gain is how my tenants, such as N.C. State University or the Carolina Hurricanes, play because that drives our business either up or down. It was groups that pushed us off. Schools weren’t as active as they had been, most likely because they’re cutting back on bus trips. But everything else is holding well, surprisingly. The Triangle, our part of the state, didn’t really suffer like other communities.

Crawford: What we see is that with the economy going backward, a lot of businesses really started managing overhead because they didn’t know what to do with the top line when the economy was going down. When they started managing overhead, they started having fewer conventions. They didn’t visit destination resorts as frequently. We do see that, depending on what industry or niche somebody’s in, they’re either getting better or they’re stagnant in their economy. We do see some folks starting to schedule some stuff out in the future. Blizzard: Our company is kind of a tale of two cities. We have a couple of hotels on the Outer Banks that have done really well and carried our business. But we’re also in the real-estate development business, and that side has not done so well. We’ve found it’s very difficult to get financing on that side. Fortunately for our hotels, we still have a big ocean beside us. There has been only one year since 1998 where occupancy hasn’t increased, and that was in 2009. It’s not growing as fast as it was, but it is still growing.

Minges: Statewide, we haven’t seen tourism expenditures drop. We’ve seen progressive growth for 20 years. So even though we have faced some challenges, our visitor volumes have remained very high. Travel expenditures last year were $17 billion, a record, in the face of a challenging economy. We just have to work harder and smarter to get visitors here and to keep them coming. They’re staying in lower-priced hotels and spending a little less money, but they’re still coming. About 70% come from out of state, and that’s good because they’re bringing new money. We have about 9 million citizens in North Carolina, and we greeted about 40 million visitors last year. The challenge is to try not only to keep North Carolinians in their own state, enjoying all the amenities that we offer, but also bringing new resources — new dollars — in to support our own businesses.

How have you reacted to changes brought on by the economic downturn?

Pashley: We started an educational campaign to attract the group side and let them know there is more to do in our area than just play golf. If what you’re looking for is a productive meeting in an inspirational setting, we’ve got that 365 days a year. We started advertising our empty meeting rooms, vast amount of space and high-quality facilities and accommodations to host meetings. We also had to add value to the leisure side. Everyone suggests not lowering your rates because it’s hard to get them back, so we sustained them. We offered an unlimited golf package in the spring of 2009. Normally you’d have one round per night, but we offered unlimited golf. It was well-received, but internally we had some angst because we weren’t sure if it was the right thing to do. But we knew we needed to do something that resonated with our core audience. We didn’t repeat it that fall, and we haven’t done it since. But it was the right thing to do at the time.

Cecil: We had more than a million ticket-paying visitors, not including our pass holders, who come more often. In 2009, we ended up with around 823,000 visitors, so we took a pretty big hit in our total attendance. We looked at our budget and decided we needed some guidelines to decide what we were going to do. If at all possible, we didn’t want to lay off any year-round, full-time people because of the recession. Our variable labor bore a fair amount of the brunt of that decision. The second thing we did was make sure we were still here when the recession ended. We wanted to, as best we could, work with our lending institutions to try to get well below our ratios wherever we could. The third thing we looked at was sustaining our guest- service ratings, which have averaged between about 9.2 and 9.6 for years now. That is crucial to our word-of-mouth. Those three things became our priority. Trying to increase attendance to a million and a half wasn’t. It’s taken a couple of years, but our gate count is back well over a million — about 1.1 million including our pass holders, which now total about 80,000. At the start of this, we had 43,000. We’re also trying to go back into some of our key markets like Charlotte, Raleigh, Greensboro, Greenville, Spartanburg and Asheville. We’re also advertising on television.

Cunningham: Our markets are different, so we had to adjust our rates accordingly. Our Williamsburg property has the D.C. and Maryland market, which can pay a higher rate. Therefore, we had to adjust because we experienced a lot of resistance to the price points we set. We had to study the leisure market a little bit more and do more promotions, whether it was our 48-hour or two-day sale, and then add value through meal-inclusive packages. Between 2009 and 2011, guests were coming and buying rooms, but we weren’t capturing their ancillary spending on food and beverages. So late last year, we began offering a kids-eat-free program. We’ve been able to recapture some of that money.

Minges: We depend largely on research to guide our decisions. We know who comes to North Carolina, what media outlets they follow and what motivates their decision to travel. Even though the economy changes, we stayed largely true to what our research has shown us in the past, and we didn’t find a whole lot of changes from a statewide perspective. We have stayed primarily in 10 key markets east of the Mississippi River that deliver most of our visitors up and down the East Coast, from New York to Florida. We have seen folks traveling shorter distances, so we’ve beefed up our marketing efforts in closer markets. During the economic downturn, we faced budget cuts.We cut operational and travel costs and overhead. But we have not pulled a penny out of marketing or advertising in 20 years. Every incremental new dollar that has been allocated to our division has gone directly to advertising and marketing, which is where we see the greatest return on investment.

Blizzard: I think it was Walt Disney who said, find a good idea and dog it until it’s done, and done right. So we reached into the wedding sector because we noticed it was recession-proof. We’ve done a good job of trying to capture more of that market by creating a wedding destination in the Outer Banks through our capital improvements. That business has probably grown about 50%. We have about three or four a weekend. It has really changed our meeting business because it’s made us shift away from the corporate traveler.

Olsen: Hockey teams have had to become very creative in putting packages together and adding value through those packages and promotion. That’s why we do 12- and 26-game packages. We were also successful in sustaining our employees. But we’ve noticed our ticket buyers aren’t buying $85 tickets; they’re buying the $35 ticket. They’re drinking one beer instead of two and buying one hot dog instead of five. Crawford: I think everybody pushed the pause button and said, “We realize this is not business as usual, so we have to diversify our offerings. We have to change the way we do things. We have to look back at the way we used to do things and figure out what couldn’t be successful.” They had to make adjustments accordingly. How does your industry affect your region? Pashley: Pinehurst is the life blood of the area. We employ a tremendous number of people. And about 5,000 jobs in Moore County are tourism-related, which is 13% of employment. So one out of every seven and a half jobs is directly tied to travel and tourism. Statewide, it’s one out of every 25.

Blizzard: Same for us. Tourism is by far the greatest thing in our communities. It’s the hub of our economy because everything — including the laundry facilities, restaurants, carpenters and contractors — spills off from it. Cecil: Biltmore employs up to 1,800 people in one year, most of which are full-time. We generate $420 million a year in direct and indirect economic benefits to western North Carolina. Minges: Tourism supports jobs, nearly 200,000, for our citizens. Last year, the leisure and hospitality sector led job growth in North Carolina at 3%. Some of those frontline employees may be making less than $30,000 a year, but the sector affects all kinds of businesses, such as construction and real-estate development. There are a lot of ancillary benefits, not the least of which is new tax revenue. We like to remind elected officials that this industry generated nearly a billion dollars in state tax revenue last year. That number hasn’t decreased in 20 years. Visitors coming into our state spend $48 million and pump $4 million of new tax revenue into our economy every day. We spend about $10 million on advertising, one of the lowest budgets in the country. For every dollar spent, we get 10 back. By all accounts, it’s a good, thriving, growing industry.

How has technology affected travel and tourism?

Blizzard: About 85% of Outer Banks’ visitors book online. But there have been some challenges because some groups, such as third-party online booking companies, capture that business. Olsen: I think the marketing profession has changed drastically. In my business in years past, you bought advertisements in magazines and on television and radio. Now, we have to hire young people who excel in social media and bring in all of those things. I have a young lady whose full-time job is to do nothing but keep up with our social-media efforts.

Cecil: At first, we took our website and information delivery and put it on Facebook. That worked OK, and we had a few thousand fans, which we thought was pretty good. But then we realized we were trying to sell something on Facebook, but most people aren’t on the site to buy something. They want to visit with their friends. So we decided to use it to start a conversation with past guests. I was at a seminar where they showed a picture of friends on a porch having dinner. Then an Avis ad popped up. The presenter asked if the ad was effective, and I thought, maybe if I needed a rental car, but I’m not on this site to buy a rental car. I’m on this site to see my friends. That shifted the way we look at Facebook. It’s a brave new world, and that conversation piece is crucial.

Cunningham: Our guests are in swimsuits and don’t want to carry around wallets, so we made wristbands that can open your room and charge your account. Obviously by having this, guests spend more, which is great. We’re also embracing online check-in because our guests come between 1 p.m. and 3 p.m., and guests leave around that time, so the push to turn rooms is great for us. If we create an online check-in experience that allows guests to just show some identification and a credit card when they arrive, we’re going to cut our check-in time from 4 to 5 minutes down to less than a minute.

Minges: Technology has presented all kinds of new things for us to learn and embrace, but print advertising is still a large part of our core branding and messaging strategy. Our goal is to try to drive the decision for people to choose to come to North Carolina. Largely those decisions are made by females age 35 to 55 with a median household income of $75,000 and above. We reach them through print publications, then we drive them online. Last year, about 4 million people came to to plan travel. We drove about a million of those from our website onto partner websites and to individual businesses. We don’t all need to put our eggs in the same basket, but with a pretty well-thought-out plan and marketing strategy, I think it works.

This article originally appeared in the April 2012 issue of Business North Carolina magazine.